P.R. Gokulakrishnan, C.J.
1. This special civil application is to quash the order dated May 27, 1982, passed by the Income-tax Officer, Jamnagar. In and by the said order, the Income-tax Officer, while granting change in the previous year, as per section 3 of the Income-tax Act, 1961 (hereinafter referred to as 'the Act'), imposed certain conditions. The condition which is impugned in this petition is condition No. 2(i) set out in the order of the Income-tax Officer and it reads as under :
'2. In this connection, I have to inform you that you are allowed to vary the accounting year from financial year ending on March 31, 1983, to the period from April 1, 1982, to June 30, 1983 (i.e., 15 months relevant to the assessment year 1984-85). There will be no assessment for assessment year 1983-84 which will be skipped over. Subsequent accounting year will commence from 1st July and end with 30th June. The above change of accounting year is allowed subject to the conditions noted below : (i) Deduction towards depreciation allowance, investment allowance, development rebate, capital expenditure on research and development, etc., will be claimed during the first previous year of 15 months as they are applicable to the previous year of 12 months. The assessee shall not claim excess depreciation, investment allowance and other statutory deductions under Chapter VI-A in respect of the excess period of 3 months comprised in the previous year.....'
2. No doubt, the prayer in the special civil application is wider in its scope; but Mr. Kaji, learned counsel appearing for the petitioner, restricts his relief for the purpose of quashing the order of the Income-tax Officer to the following extent only :
(i) Denial of depreciation of the existing plant and machinery installed prior to April 1, 1983, for the period from April 1, 1983, to June 30, 1983,
(ii) Denial of depreciation on the plant and machinery installed between April 1, 1983, and June 30, 1983; and
(iii) Denial of investment allowance for plant and machinery installed between April 1, 1983, and June 30, 1983.
3. The petitioner claims the first two reliefs on the basis of the provisions of section 32 of the Act read with rule 5 of the Income-tax Rules. The petitioner claims the third relief on the basis of the provisions of section 32A of the Act. Mr. Soparkar, learned counsel for the respondents, opposed the grant of the said reliefs claimed by the petitioner on the ground that there is a delay of five years in coming forward with this objection; that the petitioner having accepted the order of the Income-tax Officer by his acknowledgement dated June 24, 1982, should not be allowed to rescind from his acceptance of the conditions imposed by the Income-tax Officer and that the conditions imposed by the Income-tax Officer are not severable; and hence the order as a whole passed by the Income-tax Officer dated May 27, 1982, must stand or fail.
4. Originally, the previous year of the assessee under the Income-tax Act was ending on March 31 of every succeeding year. This position continued up to the assessment year 1982-83. On May 4, 1982, the assessee applied for a change of the previous year which was from April to March, to July to June. Hence, according to the assessee, the year will end not on March 31, 1983, but on June 30, 1983. Naturally, the period for assessment will be 15 months for the said year, i.e., the year 1982-83. On May 27, 1982, the Income-tax Officer permitted the change of the accounting year by his order, a portion whereof we have extracted hereinabove. Since the objection is raised in respect of condition No. 2(i) only in the said order, we have not extracted paragraph 2(ii) of the said order.
5. We have carefully gone through the objections raised by Mr. Soparkar, learned counsel appearing for the respondents. It is clear from the facts of the case that while the petitioner filed the return in 1984, it has objected to the condition mentioned above imposed by the Income-tax Officer while granting the change of the previous year. There is no question of any bar of limitation as such arising in this case. The delay on the ground that the petitioner has approached the High Court after a period of four years cannot be sustained, inasmuch as the petitioner had objected to the same in its return filed in the year 1983. In that view of the matter, the objection as regards delay cannot be sustained.
6. The next objection of Mr. Soparkar is that the petitioner had accepted the change of previous year along with the conditions by its letter dated June 24, 1982. This objection also cannot be sustained inasmuch as the letter referred to by the respondent which is at page 24 of the special civil application cannot be construed as acceptance of the conditions imposed by the Income-tax Officer in his order which is impugned herein. The said letter reads under :
'We duly acknowledge with thanks the receipt of your letter No. CC/CZ/2352/1982-83 dated May 27, 1982, on the subject cited above contents of which have been noted.'
7. The aforesaid extract of the letter will clearly prove that there is no question of acceptance of the conditions imposed by the Income-tax Officer.
8. The objection to the effect that the conditions imposed cannot be severed cannot be appreciated in view of the fact that the Income-tax Officer has imposed the said conditions arbitrarily which conditions go against the spirit of the Act itself and deny lawful deductions which the assessee was entitled to have. Such arbitrary conditions deserve to be struck off from the impugned order itself. Mr. Kaji, learned counsel appearing for the petitioner, restricts his grievance to the three reliefs which we have extracted hereinabove; and, in our opinion, the said reliefs are permissible under the Act itself to an assessee. When the Income-tax Officer by his order denies such reliefs which the assessee is entitled to have in law, the order to that extent deserves to be struck down.
9. Mr. Soparkar states that the Income-tax Officer has ample power to impose such conditions as the Income-tax Officer may think fit to impose. In support of his contention, learned counsel cited the decision reported in Esthuri Aswathaiah v. CIT : [1966]60ITR411(SC) . In this case, the Supreme Court while dealing with the power of the Income-tax Officer to accord change of previous year and his power to impose conditions observed (p. 416) :
'The order of the Income-tax Officer, in substance, permitted the change of the previous year on condition that the previous year in relation to the assessment year 1952-53 would consist of the period of 21 months commencing from July 1, 1950, and ending on March 31, 1952. The Income-tax Officer had power to impose this condition.'
10. Continuing, the Supreme Court observed (p. 416) :
'The further condition that the income of the previous year of 21 months would be assessed at the rate applicable to the income of 21 months is redundant. Once the length of previous year is found to be a period of 21 months, the income of the entire period of 21 months must be considered to be the income of the previous year relevant for the assessment year 1952-53 and the entire income must be assessed at the rate specified in the relevant Finance Act.'
11. The abovesaid decision has no bearing on the fact of this case. The condition imposed by the Income-tax Officer in the abovesaid case treating the period of 21 months for the assessment year 1952-53 commencing from July 1, 1950, and ending March 31, 1952, was held to be within the power of the Income-tax Officer. The Income-tax Officer could have refused permission to change the year. Even if he permits the change, he cannot put conditions which are arbitrary. As far as the present case is concerned, the Income-tax Officer has imposed the conditions arbitrarily and such conditions go against the spirit of the Act itself and deny the lawful deductions that the assessee was entitled to have. In those circumstances, we are of the view that the decision cited by Mr. Soparkar cannot be of much help to the respondent.
12. For all these reasons, this special civil application is partly allowed and the conditions imposed by the Income-tax Officer in paragraph 2(i) which is to the following effect :
'(i) Deduction towards depreciation allowance, investment allowance, development rebate, capital expenditure on research and development, etc., will be claimed during the first previous year of 15 months as they are applicable to the previous year of 12 months. The assessee shall not claim excess depreciation, investment allowance and other statutory deductions under Chapter VI-A in respect of the excess period of 3 months comprised in the previous year.'
are quashed. Rule is made absolute to the above extent only with no order as to costs.
13. We make it clear that the abovesaid order will not in any way hamper the discretion of the Income-tax Officer to examine the claim of the petitioner without taking into consideration the directions given by the Inspecting Assistant Commissioner by his order dated February 9, 1987.